Crowding out (economics) facts for kids

In economics, crowding out happens when the government starts buying or selling more stuff in the market. This affects other people and businesses--usually in a bad way.

For example, if the government buys more stuff, it may have to borrow more. By borrowing more there will be a higher interest rate (see supply and demand). This will make it harder for other companies and people to borrow. The government is said to "crowd out" the market.

See also

In Spanish: Efecto desplazamiento para niños